\section{Open Innovation}
\label{sec:openinnovationtheory}

The relation between open innovation and smart city ecosystem is significant. Cities have been realized as a platform for innovation. Moreover, with the open innovation paradigm, different governmental organisations are encouraging experiments for setting up user-driven open innovation environments \cite[p. 432]{SCHAFFERS2011}.  \cite{SCHAFFERS2011} describe cities as innovation ecosystems \textit{``empowering the collective intelligence and co-operation capabilities of user/citizen communities for designing innovative living and working scenarios.''} So, in this section we will introduce the general concept of open innovation to provide a common understanding of the concept. \bigskip

\noindent The notion of open innovation has been realized to be of high relevance with smart city paradigm. The smart city is considered as an environment for open innovation, where the government, citizens, industries, and academics can have more open and networked forms of collaboration. According to Henry Chesbrough, the concept of open innovation is not only limited to industry but also extends to the relationships between the government and other institutions within the society \cite [p. 158]{PASKALEVA}.

\subsection{From Closed to Open Innovation}

In general, innovation is an origination of new ideas, products, or processes. Successful innovation can be obtained by managing uncertainties and these uncertainties can be minimised by having two types of knowledge: \textit{``knowledge on customer and market needs and knowledge on (technologically) possible solutions''} \cite[p. 32]{VOLKER}. Customers are viewed as sources of information for innovation. This also goes hand in hand with the concept of encouraging citizen involvement in developing smart cities, where involving citizens will help to understand their needs. Furthermore, \textit{``[t]he new bottom-up approaches based on user-generated content, social media and Web 2.0 applications''} \cite[p. 158]{PASKALEVA} provides the user with modes for involvement.

\begin{wrapfigure}{r}{0.5\textwidth}
  \begin{center}
    \includegraphics[width=0.5\textwidth]{./Pictures/closedinnovationmodel}
    \end{center}
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    \caption{\textit{The Closed Innovation Model} \cite[p. 36]{CHESBROUGH}}
    \label{fig:closedinnovationmodel}
\end{wrapfigure}

In the traditional industrial world, innovation was based on internal research and development (R\&D).

The internal R\&D was valued as a valuable resource for new innovations and was also used as a powerful tool to retain monopoly \cite[p. 35]{CHESBROUGH}. The development of a product was done within the boundary of a firm. So, the large corporations with big large R\&D infrastructures were able to stay competitive in the market. \cite{CHESBROUGH} developed the \textit{``Closed Innovation Model''}, which \textit{``calls for self-reliance: If you want something done right, you've got to do it yourself''} \cite[p. 36]{CHESBROUGH}. Figure \ref{fig:closedinnovationmodel} depicts the closed innovation model. In this model \textit{``[...] a company generates, develops, and commercializes its own ideas. This philosophy of self-reliance dominates the R\&D operations of many leading industrial corporations for most of the 20th century''} \cite[p. 36]{CHESBROUGH}.

This of course hindered the start ups with limited resources to get in to the market. But the growth of private venture capitalist and the movement of the knowledge professionals led to the erosion of closed innovation and hence a shift towards the open innovation paradigm \citep{CHESBROUGH}. \bigskip

\noindent The concept of open innovation is based on the sharing of ideas, knowledge, and resources. \cite{CHESBROUGH1} defines open innovation as,

\begin{quote}

\textit{``the use of purposive inflows and outflows of kn\-owledge to accelerate internal innovation, and expand the markets for external use of innovation, respectively.''}

\end{quote}

\noindent So, open innovation advocates that valuable ideas can both come from inside or outside the organisation and also get to the market from inside and outside the organisation. The Internet is one main enabler of open innovation and open APIs are concrete methods to realize this.

Figure \ref{fig:openinnovationmodel} depicts the open innovation model by Henry Chesbrough. The main difference between the open and closed business model is that there is easy movement of innovations, both inside and outside the company. This is represented by a dashed line in the figure \ref{fig:openinnovationmodel}.

\begin{wrapfigure}{l}{0.5\textwidth}
  \begin{center}
    \includegraphics[width=0.5\textwidth]{./Pictures/openinnovationmodel}
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    \caption{\textit{The Open Innovation Model} \cite[p. 37]{CHESBROUGH}}
    \label{fig:openinnovationmodel}
\end{wrapfigure}
\noindent The open innovation para\-digm justifies two main anomalies of closed innovation paradigm \cite[p. 5]{CHESBROUGH1}.
\begin{itemize}

\item In the closed innovation paradigm it was difficult to capture the value of spillovers generated from industrial R\&D and it was regarded as the cost of doing business but in open innovation paradigm these spillovers are viewed as an opportunity to bolster a company's business model.

\item In the closed innovation paradigm intellectual property was protec\-ted as a company's valuable assets and not much value was generated, but in the open innovation paradigm intellectual property adds additional revenues to the current business model.

\end{itemize}

\noindent So, in our research context, data can be seen as generated spillovers, which  can create extra value (both economic and social) when being opened up. \bigskip

\noindent After understanding the concept of open innovation, it is also important to understand the development process of open innovation.

\subsection{Steps in developing open innovation}
\label{subsec:stepsindevelopinginnovation}

\cite{CHESBROUGH} depicts three main areas for the development of open innovation and argues that companies mainly focus their activities in these three areas:

\begin{description}

\item[Funding Innovation] \hfill \\ \textit{``Innovation investors and benefactors''} are focused on providing funds for innovation. Innovation investors can be \textit{``corporate R\&D budget, venture capital firms, angel investors, corporate VC entities, private equity investors e.t.c.''} \cite[p. 38]{CHESBROUGH} Innovation benefactors are focused on early research about the innovation.

\item[Generating Innovation] \hfill \\ Four types of organisations are identified in this area. They are: \textit{``innovation explorers, merchants, architects and missionaries.''} Innovation explorers are mostly focused on finding out about the innovation. Innovation merchants are focused on actual development of the product and with that they innovate for some economic benefits. Innovation architects are those providing valuable services in a complex technology world. \textit{``To be successful, innovation architects must establish their system solution, communicate it, persuade others to support it and develop it in the future''} \cite[p. 39]{CHESBROUGH}. At last, innovation missionaries are like welfare organisations that innovate to serve a cause and are not motivated by economic benefits.

\item[Commercializing Innovation] \hfill \\ Two types of organisations are identified in this area. They are: \textit{``innovation marketers and one-stop centres.''} Innovation marketers have some of the characteristics of other organisations but their main function is to create beneficial market ideas. Marketers understand the market needs and support innovation. \textit{``To this day, a number of companies, called `fully integrated innovators', continue to espouse the closed innovation credo of `innovation through total control' ''} \cite[p. 40]{CHESBROUGH}
\end{description}

\subsection{Open innovation in the public and private sector}

Open innovation has been viewed as a new paradigm with possibilities for good and efficient development because of its characteristics of sharing resources and knowledge \citep{LEE}. This new innovation paradigm has highly influenced the private and public sector by facilitating strategies and work processes. Open data acts as an enabler of open innovation. The underlying basis for opening up of data is to increase transparency, government efficiency, and citizen engagement. The common argument that supports these strategies is \textit{``that the publishing of government data in a reusable format can strengthen citizen engagement and yield new innovative businesses ''} \cite[p. 1]{HUIJBOOM}. This increases the necessity for the public sector to understand the value of open innovation. And so, it also increases the necessity of understanding how open innovation has been perceived in the private and public sector. \bigskip

\noindent Due to the globalization private sectors increasingly understand the necessity of adapting open innovation strategies. The essence of the open innovation paradigm is not only limited to high-tech industries but extends to other industries like health care, banking, insurance, etc. \cite[p. 37-38]{CHESBROUGH}. Open innovation in the private sector is motivated by monetary gains such as higher revenues, whereas open innovation in the public sector is pushed by service performances and public benefit \cite[p. 149]{LEE}. \cite{LEE} also argues that \textit{``[p]ublic sector innovation should focus more on a continuous process of interaction and negotiation among various stakeholders.''} Implementation of open innovation strategies in public organisations led them to a restructure of organisational forms. The old public-administration approach, \textit{``which is characterised by large-scale government-led innovation, often national and universal in scale,''} \cite[p. 149]{LEE} is replaced by a new public management approach. This approach \textit{``attempts to restructure organization forms and processes, with heightened emphasis on user-orientation''} \cite[p. 150]{LEE}. Beside this approach, a networked governance approach is also adopted by different public sector organisations. This approach is based on \textit{``emerging patterns of governance and service delivery [where] the public is considered as a co-producer of service and innovation [and] the government can solve problems faster and accurately by harnessing a collaborative network of citizen experts''} \cite[p. 150]{LEE}. Nambisan (2008) describes two types of network governances: \textit{government-led}, which can be also seen as a top-down approach and \textit{community-led}, which can be also seen as bottom-up approach \citep[p. 151]{LEE}. The essence of bottom-up approach can be realized by opening up of the data. This can actually involve citizen in governance matters and in this case government acts as an \textit{``innovation catalyst''}. \cite{LEE} further argues that the public sector is more reluctant in opening of the data. This reluctance might be due to \textit{``the responsibilities of governments to handle and protect confidential data''} \cite[p. 158]{LEE} and also due to \textit{``[domination] by long service employees with strong cultural values and norms''} \cite[p. 158]{LEE}. So, proper institutionalization is necessary for obtaining the maximum value of an open innovation strategy. Such institutions will help public sector employees to recognize the potential of open innovation and realize how it can support their work practices \cite[p. 159]{LEE}. \bigskip

\noindent This understanding of open innovation theory helps us to understand the opportunity of opening up of data and how the cross sectoral open innovation can be achieved by implementing proper institutions.